Consider the power of a single word over the fortunes of the parties to a property deed. Such was the effect of the court’s ruling in Barrow Shaver Resources, LLC, et al v. NETX Acquisitions, LLC, et al.

In 1963, by the Stone Deed, Dawson and Hill conveyed a 181-acre tract in Cass County, Texas, to the Stones (John and Treba, not the Rollings). The granting clause described the land by metes and bounds, and continued, “There is likewise conveyed … 1/8th of the Oil, Gas and Other Minerals … .”  The conveyance was subject to an oil and gas lease then existing. At the time of the suit, Barrow Shaver had an oil and gas lease from Dawson/Hill and NETX had a lease from Merritt (successor to the Stones).

The question and spoiler alert

Did Dawson/Hill convey 1/8th of the minerals or did they convey 100% of the minerals and attempt to reserve 7/8ths in themselves?  Dawson and Hill conveyed 1/8th of the minerals (and the surface, of course).

The Court’s journey to the answerIn analyzing the document, the court reviewed the general rules that guide contract construction:

  • discern the parties’ intent from the entire document,
  • the parties’ intent, when ascertained, prevails over arbitrary rules,
  • use no mechanical rules of construction,
  • harmonize all the parts of the contract.

The court also cited four principles of real property law that apply to deed interpretation:

  1. A warranty deed will pass all of the estate owned by the grantor of the time of the conveyance unless there are reservations or exceptions that reduce the estate conveyed.
  2. Reservations must be made by clear language (they cannot be implied).
  3. Words of doubtful meaning are construed against the grantor.
  4. A deed is construed to confer upon the grantee the greatest estate the terms of the instrument will permit.

Because there was no reservation of minerals, Rules 1 and 2 did not apply.  Because the deed was unambiguous, Rule 3 did not apply. That left Rule 4, which is consistent with Texas Property Code §5.001:

An estate in land that is conveyed or devised is a fee simple unless the estate is limited by express words or unless a lesser estate is conveyed or devised by construction or operation of law.

“Likewise” indicated the grantors’ intent in the initlal portion of the granting clause to convey something less than the fee simple estate. The only way to give effect to both grants was to conclude that Dawson/Hill conveyed the entire surface estate and 1/8th of the mineral estate. No other clause indicated that a greater mineral estate was conveyed, said the court.

The subject-to clause served no function and did not affect the estate being conveyed. That clause was to protect a grantor against a claim for breach of warranty when some mineral or other interest was outstanding.

The habendum clause, “To have and to hold … ” modified the “above described premises” which in turn referred to the estate that was conveyed in the granting clause i.e. the surface and 1/8th of the minerals. Thus, the granting/habendum clause affirmed that the Stones received all rights and appurtenances belonging to them as the owners of the surface estate and 1/8th of the mineral estate but did not support an argument that the fee simple estate was conveyed.

The judgment

The four corners of the Stone Deed conveyed the surface estate and 1/8th of the minerals. Dawson/Hill own 7/8ths of the minerals and Merritt owns the surface and 1/8th of the minerals. This construction harmonized all parts of the deed, gave effect to every clause, and gave the Stones the greatest estate permissible under the language of the deed.

A musical interlude.